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– Macroeconomic Equilibrium in the Short Run- Output, Employment and InflationPlease answer clearly step by step extensive answers, so i can see what you have done ๐Ÿ™‚
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Chapter 11: Macroeconomic Equilibrium in the Short Run
Question1 In reality, tax revenues are not exogenous, but move positively with income (GDP).
Suppose that T = ๐‘‡ฬ… + tY, where t is an exogenous tax rate. Use this tax revenue function to derive
the government spending multiplier in the following simple model: C = c + c1(Y โ€“ T) I = ๐ผฬ… G = ๐บฬ…
NX = NX0 -mY
Question 2 Derive the IS curve for the economy in the above exercise, with I = ๐ผฬ…โ€“ 20i. Plot it in (Y,
i) space.
Chapter 13: Output, Employment and Inflation
Question 3 A Philips curve is represented by the following relationship: ฯ€ = ๐œ‹ฬƒ โ€“ 10(U โ€“ ๐‘ˆฬ…) + s,
where s is a supply shock term, on average equal to zero. Draw the Phillips curve when ๐‘ˆฬ… = 7% and
underlying inflation ๐œ‹ฬ… = 3% and 6%. Okunโ€™s Law is U โ€“ ๐‘ˆฬ… = -0.5 (Y โ€“ ๐‘Œฬ…)/๐‘Œฬ…. Draw the aggregate
supply schedule when ๐‘Œฬ… = 10,000.
Question 4 Using the conditions of the above exercise, show the impact of supply shocks s = 5%,
and s = -2%. Separately show the effect of raising ๐‘Œฬ… to 10,200. Why is it argued that improving the
performance of the supply side of the economy is good for both inflation and employment?

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